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Let's abolish income tax?

Updated on August 28, 2010
True Brit Piggy Banks!
True Brit Piggy Banks!

Why Pay Tax?

Income tax was first charged in Britain by William Pitt the Younger in December 1798 to pay for weapons and equipment for the Napoleonic Wars. Pitt's new 'concept' of income tax began at a levy of 2 old pence in the pound (0.83%) on incomes over £60 (about £50,000 now) and increased up to a maximum of 2shillings (10%) on incomes of over £200.

Pitt wanted the new tax to raise £10 million, but in 1799 he got just over £6 million.

Over the next few years taxation was abolished and re introduced as wars started and finished, but within 50 years it was pretty much a done deal that whoever ran the government was going to take a chunk of your income to pay for their largess and military muscle.

What is patently obvious is that wars are bad for our pockets, but irresistible to politicians and power hungry military men. Maggie Thatcher used her war (The Falklands) to secure victory in an election, when defeat looked inevitable, G W Bush did the same, wars are good news for politicians but expensive for us.

Well saving some from the 70% not spent on 'human resources' would help!
Well saving some from the 70% not spent on 'human resources' would help!

What's the alternative?

Obviously in a modern super state we run expensive projects; hospitals, schools, welfare systems and the military, let's not forget the military!

It is obvious from the pie chart right that the military take the majority of tax raised, in fact 54% in the profile shown!

Let's not discuss (in this hub) the validity of this fact, our discussion is taxation and how to raise it, not what it's spent upon.

What is the answer to raising tax...

Is where we are taking this article, you see I have long believed that if we stopped taking money from your income, and shifted taxation into a two tier system, we would improve and get more control over taxation.

Raise a tax levy.

The government know exactly how much tax they need to raise, to achieve what they want to do each year, they also know how many people there are in the country, so why not simply divide expenditure by population and set a tax levy?

According to current figures that would be about $13,000 per head in the USA, in order for the 300 million citizens to meet the 4 trillion (that's 12 zeros) expenditure envisaged by that country.

So a family of four would be set a tax levy of $52,000 to be paid.

Patently this would horrify any family of four with only two wage earners at best, however isn't this the 'equality' that people constantly bleat about.

I knew from early age that 'equality' was nonsense, you don't need to be a mathematician to work out that when you divide all of the wealth of the world between all of the people, everyone has too little to do anything with.

I would reckon that each one of us would have about $1,500 each in a fair division, remembering that 90% of the world have 5% of the assets, whereas we super rich (and that includes you if you can read this in the comfort of your own home) make up 10 % of the world and have 95% of the goodies. It's even worse when you realise that the top 1% of the world actually have 80% of our 95%.... (where is my gun?).

But the cold reality is that IF we made an equal distribution of all assets in the world, then in a short time some people would have many times more than they initially received by carrying out trading, and others would be without any cash again, though they may have a flat screen TV !

Some people will always 'rise to the top' of any dunghill and come out smelling of roses.

Others can be placed on the top of the same dunghill and will sink to the bottom, no matter what.

Tax Levy - Indirect Tax paid = Balance

Currently you pay some tax by direct taxation and most by indirect taxation and you have no idea how much the total amount is as a percentage of your total income.

Now the total tax spend MUST come from somewhere, so if the idea of your tax bill being $13,000 per head per year is of concern to you, then you should realise that if YOU are not paying that amount, SOMEBODY ELSE IS paying your shortfall.

Surely in an 'equal' society each individual paying their own share of the expenditure is just and correct isn't it?

Tax only really affects working people, those who are 'entrepreneurs' (that fabulous word that GWB classically stated "The French don't even have a word for', tend to escape some taxation, whereas the 'movers and shakers' pay next to nothing by basing their money where people don't try to take it from them.

Money makes money.

Therefore nobody feels robbed....
Therefore nobody feels robbed....

Now let's examine how moving taxation to 100% indirect taxation would benefit society.

With indirect taxation ALL tax is raised from expenditure, not income, therefore those who spend more, pay more.

Therefore nobody feels robbed when their pay check shows them working for the state for the first six months of the year.

As this taxation would also have logical level changes, some items would be no tax, some low tax and so on through to luxury tax on the highest level.

Taxation would be collected either:

  • At the point of either first sale (for good manufactured in the country)
  • At the point first entry for imported goods.

Tax would be collected on the anticipated gross sale price, i.e. if the manufactured item was first sold at $100, and the anticipated gross sale price was (say) $500 (allowing for the moves needed between manufacturer and consumer)with a tax rate of 20%, then the manufacturer would sell the item at $200 ($100 cost + $100 tax) and pass the tax directly to the tax offices AS PART OF THE TRANSACTION. No monthly accounting, no three monthly audit, just a direct bank transfer as soon as the funds hit the account.

All the other links in the supply chain have NO tax returns to make, being in possession of a valid tax paid certificate from the manufacturer.

The tax office receives it's tax faster, there is no chance for the value added tax to disappear down the line of suppliers, the whole supply chain saves paperwork and accounting proceedures that cost fortunes to run and the end user pays no more tax than the government has set for that item.

The item may be a low tax rate, say a basic washing machine at 10% taxation, or a luxury washing machine at say 50% taxation, it is then up to the individual which item they buy.

The rich man can buy a basic item and the poor man can buy the luxury one, both pay the same tax share.

When all your income is available to you, then YOU can manage your accounts and the feel good factor would be large.

Likewise charitable donations will be offset....
Likewise charitable donations will be offset....

How do we fit indirect taxation in with the tax levy we need to pay?

Well the consumer keeps all their receipts, because each receipt contains details of the amount of tax paid, and these amounts will be off settable against your tax levy amount.

If the consumer paid by credit or charge card, the amount of tax paid would (or could) be credited against their tax levy instantly, and they could see at any time how their tax bill was progressing. People paying cash would still need to make a physical return, presenting receipts for a tax credit.

Of course big spenders who ended up paying more than their quota of the tax levy would lose some, but a record could be kept, and if they were tax deficient in other years some percentage could be accredited to their tax levy account. The excess collected this way will offset the shortages accrued by people who just don't spend enough.

If someone had a short fall, then the tax authorities would be entitled to request that they paid the balance of their tax levy, but obviously where the person or family could show they were unable to pay due to poverty, this would be cancelled by the authorities.

Likewise charitable donations will be offset, making charitable gifting a suitable way for people who spend little to pay their taxes without giving it to the government, if that makes them feel better!

Where there is a short fall in indirect taxation raised, we simply rebalance the figures by adjusting the various sales levels: i.e. if lower priced basic items have suddenly become more sought after, raise the level, but make it possible for anybody who was recognised as below the poverty level to get instant rebates at point of purchase, with a special 'credit card' which repaid the rebate back to their card, allowing them instant access to the money.

Defrauding the system would be virtually impossible, as the tax is paid at source and major manufacturers are unlikely to be selling their goods in the black economy, besides which every item would have a RFID tag which allowed verification that tax had been paid.

What about smuggling?

Again, as point of entry would be the other way tax was collected, then whatever was imported would have the tax paid at the border.

Importers would bring in a shipment of goods from (say) China and each item on the manifest would have a tax value, which the importer would pay on entry.

This would discourage imports and therefore encourage local manufacturers to accommodate a newly revived market that needed filling, creating jobs.

Established importers would be able to move the tax payment point from entry to first sale, but individuals and small traders would need to pay on entry. This would stop many smaller operators, but then again the under capitalised are those most liable to go out of business and leave debts to the tax authorities, so it would be self regulating and bankers would be able to provide the required credit to cover import taxation until reliable trader status had been established with the authorities.

In 'open border' Europe people buying a car in (say) Belgium for cost reasons, and moving the vehicle to the UK, would either pay taxation on entry, if they required to keep the car in the UK, or be given a period to do so, after which the car would need to be removed from the country, or confiscated by the authorities. The tax payable would be the difference between the tax paid in the other state, and the tax due in the receiving state.

The idea of an army of bureaucrats needing to find jobs....
The idea of an army of bureaucrats needing to find jobs....

The best benefit is...

We would need less tax men, because most of the tax payments would be automatically paid to the revenue, so; much less paperwork, fewer tax officers and less intrusion into our lives.

The idea of an army of bureaucrats needing to find jobs that created wealth rather than take it away from people (and give 54% to the war machine) is extra appealing and would cheer up most taxpayers immediately!

We cannot avoid the obvious fact that tax is needed to pay for the society we choose to live within. The problem to date is that the tax system is cumbersome, bureaucratic and unfair, in that; if you are rich enough to pay fancy advisers, you pay much less than normal folk in percentile terms on profits made.

Corporate tax is another matter (and maybe another hub?) but generally I would choose to again drop corporate profit tax as it stands, and encourage more businesses to set up in a country where taxation for business was based upon an equation of how many people were employed (and at what payment rates) than on the profit declared.

But again, as most business involves the sale of good or services, I'd make it point of sale based. Our modern computer society and banking system can easily be made to accommodate instant cash transfer of a set percentage amount from any and all transactions made electronically, which account for the vast majority of transactions.

Yes cash will still thrive in the black econnomy, but then the black economy will always thrive in any society, some people just function better that way and don't fit into our moulds.

But at least the black economists will be paying tax on what they spend.


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    • ib radmasters profile image

      Brad Masters 

      9 years ago from Southern California

      new - failure to edit

    • ib radmasters profile image

      Brad Masters 

      9 years ago from Southern California

      Great Hub, sorry I wasn't aware of it when it was knew.

      It is timeless, as long as the current system is still in power.


    • profile image

      Richard Tawn 

      10 years ago

      Completely agree? join the face book group

    • aguasilver profile imageAUTHOR

      John Harper 

      10 years ago from Malaga, Spain

      Hi Lady E,

      I sent this hub to David Cameron's office... no reply!

      The thing is, our tax men are powerful people, and governments are disinterested in solving any problems, just wanting to stay in power.

    • Lady_E profile image


      10 years ago from London, UK

      Very interesting Hub - I'm behind you. I'm tired of all the taxes we pay in UK. Income Tax, Council Tax, Road Tax. I'm sure "breathing in air Tax" will be introduced soon. (on a positive note, its nice when they send you a tax refund when you are not expecting it. lol)

      Great Hub.

    • profile image

      Accounting firm 

      11 years ago

      More good informations thanks for helping me out. Always a pleasure to see information that is useful, thanks again

    • aguasilver profile imageAUTHOR

      John Harper 

      11 years ago from Malaga, Spain

      Thanks creativeone59.

    • creativeone59 profile image

      Benny Faye Ashton Douglass 

      11 years ago from Gold Canyon, Arizona

      Great hub, thanks for bringing to our attention. thanks for sharing it. Blessings to you. creativeone59

    • aguasilver profile imageAUTHOR

      John Harper 

      11 years ago from Malaga, Spain

      Yeah, Jim, at the time that Lennon wrote that song, the tax rate for the Beatles (and anyone else making money) was 95% and in some cases it actually exceeded the amount earned! Go figure! - Hence most everyone making money moved to France to anywhere else they could keep their cash.

      The Rolling Stones became an offshore company at the start of their career, and NEVER paid any UK tax on their money.

      Socialist tax concepts just don't work.

      Earning huge amounts of money is not a sin, not should it be penalised.

      I've been considered rich (by western standards) twice in my life (to date) and having the ability to do whatever you want is great, but it surely does separate one from God.

      I prefer getting my physical sustenance daily and always being available to hear what God says and do what God wants.

      I'm not saying I prefer poor to rich, just that rich has a whole different set of problems which are potentially far more deadly and serious than poor does.

      Better stop or I'll be writing another hub in my comments page!

      Thanks for reading it JimLow

    • profile image


      11 years ago

      Interesting suggestions Aguasilver!

      I first became aware of how oppressed people feel by unfair taxation when hearing the Beatle's song "Taxman" as a youth.

    • aguasilver profile imageAUTHOR

      John Harper 

      11 years ago from Malaga, Spain

      Thank you gentlemen, I take it as a high compliment coming from you two! - who I hold in high respect.

      Sometime I will write a hub about the 'Logic Party' (not the USA version, but one I wanted to start in the UK!)

      In fact, maybe that's the next hub in this series.... hmmm!

    • breakfastpop profile image


      11 years ago

      Great hub..lots of food for thought. I'll print this hub and study it. Thanks

    • 50 Caliber profile image

      50 Caliber 

      11 years ago from Arizona

      Wow, that is very deep in thinking this through. I'll have to read it a couple of times to catch all of your points.

      You Sir are very astute of the operations of day to day things that I never give second thought.

      Thank you for making the wheels turn in my head knocking the cob webs off.


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